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Japan Exchange Rate Regime - Essay Example
Finance & Accounting
Pages 5 (1255 words)
The major currency that is used in Japan is Yen and all matters related to the currency were normally administered by the Ministry of Finance…
The major currency that is used in Japan is Yen and all matters related to the currency were normally administered by the Ministry of Finance. However, the administration was carried out with the cooperation of the Ministry of International Trade (MITI) and Industry and the bank of Japan. MITI also handled licenses related to exports and imports. However, the authority for approving major payments was given to the authorized banks in Japan.Studies reveal that trade in Japan was being regulated by the government directly before 1949. During this time, the country practiced multiple exchange rates. However, the direct control by the government was gotten rid of in 1949 and a new system that was meant to regulate foreign trade was introduced since the market economy was under transition. This was meant to ensure that the foreign trade system in the country would be compatible with the market economy that was in transition. Japan also shifted from plural exchange rate regime to the single exchange rate regime. This regime continued to play as the dominant force in Japan until the early 1960s. The major force that interrupted the performance of the Japanese currency was the US dollar. In this case, Japan sustained a fixed exchange rate of 360.00 Yen for every US dollar up to 1971. However, in 1971, the Yen was permitted to float above its fluctuation ceiling whereby an effective fluctuation rate was implemented. However, since the US dollar continued to devalue, the Bank of Japan was forced to place a control that would regulate the exchange rate and facilitate a floating basis . ...